Philippine Airlines, Inc. vs. Court of Appeals

10/3/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 255
48 SUPREME COURT REPORTS ANNOTATED

Philippine Airlines, Inc. vs. Court of Appeals
*
G.R. No. 119706. March 14, 1996.
PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF

APPEALS and GILDA C. MEJIA, respondents.
Common Carriers; Air Transportation; Compromise

Agreements; The exposition of the factual ambience and the legal
precepts in this adjudication may hopefully channel the
assertiveness of passengers and the intransigence of carriers into
the realization that at times a bad extrajudicial compromise could
be better than a good judicial victory.—This is definitely not a case
of first impression. The incident which eventuated in the present
controversy is a drama of common contentious occurrence
between passengers and carriers whenever loss is sustained by
the former. Withal, the exposition of the factual ambience and the
legal precepts in this adjudication may hopefully channel the
assertiveness of passengers and the intransigence of carriers into
the realization that at times a bad extrajudicial compromise could
be better than a good judicial victory.
Same; Same; Contracts; Contracts of Adhesion; Contracts of
adhesion are not invalid per se.—A review of jurisprudence on the
matter reveals the consistent holding of the Court that contracts
of adhesion are not invalid per se and that it has on numerous
occasions upheld the binding effect thereof.
Same; Same; Same; Same; The Supreme Court has construed
obscurities and ambiguities in the restrictive provisions of
contracts of adhesion strictly albeit not unreasonably against the
drafter thereof
_______________
* SECOND DIVISION.
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VOL. 255, MARCH 14, 1996 49
when justified in light of the operative facts and surrounding

circum-stances.—The peculiar nature of such contracts behooves
the Court to closely scrutinize the factual milieu to which the
provisions are intended to apply. Thus, just as consistently and
unhesitatingly, but without categorically invalidating such
contracts, the Court has construed obscurities and ambiguities in
the restrictive provisions of contracts of adhesion strictly albeit
not unreasonably against the drafter thereof when justified in
light of the operative facts and surrounding circumstances.
Same; Same; Warsaw Convention; Public International Law;
While the Warsaw Convention has the force and effect of law in the
Philippines, the same does not operate as an exclusive enumeration
of the instances when a carrier shall be liable for breach of
contract or as an absolute limit of the extent of liability, nor does it
preclude the operation of the Civil Code or other pertinent laws.—
The appellate court declared correct the non-application by the
trial court of the limited liability of therein defendant-appellant
under the “Condi-tions of the Contract” contained in the air
waybill, based on the ruling in Cathay Pacific Airways, Ltd. vs.
Court of Appeals, et al., which substantially enunciates the rule
that while the Warsaw Convention has the force and effect of law
in the Philippines, being a treaty commitment by the government
and as a signatory thereto, the same does not operate as an
exclusive enumeration of the instances when a carrier shall be
liable for breach of contract or as an absolute limit of the extent of
liability, nor does it preclude the operation of the Civil Code or
other pertinent laws.
Same; Same; Contracts; Contracts of Adhesion; The validity of
provisions limiting the liability of carriers contained in bills of
lading have been consistently upheld, though the Supreme Court
has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they
should be disregarded.— The validity of provisions limiting the
liability of carriers contained in bills of lading have been
consistently upheld for the following reason: “x x x. The
stipulation in the bill of lading limiting the common carrier’s
liability to the value of goods appearing in the bill, unless the
shipper or owner declares a greater value, is valid and binding.
The limitation of the carrier’s liability is sanctioned by the
freedom of the contracting parties to establish such stipulations,
clauses, terms, or conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs and
public policy.
50
x x x.” However, the Court has likewise cautioned against blind

reliance on adhesion contracts where the facts and circumstances
warrant that they should be disregarded.
Same; Same; There is no absolute obligation on the part of a
carrier to accept a cargo.—There is no absolute obligation on the
part of a carrier to accept a cargo. Where a common carrier
accepts a cargo for shipment for valuable consideration, it takes
the risk of delivering it in good condition as when it was loaded.
And if the fact of improper packing is known to the carrier or its
personnel, or apparent upon observation but it accepts the goods
notwithstanding such condition, it is not relieved of liability for
loss or injury resulting therefrom.
Same; Same; Estoppel; A common carrier is estopped from
blaming a passenger for not declaring the value of the cargo
shipped and which would have otherwise entitled her to recover a
higher amount of damages where she had been effectively
prevented from doing so upon the advice of the carrier’s personnel
for reasons best known to themselves.—In other words, private
respondent Mejia could and would have complied with the
conditions stated in the air waybill, i.e., declaration of a higher
value and payment of supplemental transportation charges,
entitling her to recovery of damages beyond the stipulated limit of
US$20 per kilogram of cargo in the event of loss or damage, had
she not been effectively prevented from doing so upon the advice
of PAL’s personnel for reasons best known to themselves. As
pointed out by private respondent, the aforestated facts were not
denied by PAL in any of its pleadings nor rebutted by way of
evidence presented in the course of the trial, and thus in effect it
judicially admitted that such an advice was given by its personnel
in San Francisco, U.S.A. Petitioner, therefore, is estopped from
blaming private respondent for not declaring the value of the
cargo shipped and which would have otherwise entitled her to
recover a higher amount of damages. The Court’s bidding in the
Fieldmen’s Insurance case once again rings true: “x x x. As
estoppel is primarily based on the doctrine of good faith and the
avoidance of harm that will befall an innocent party due to its
injurious reliance, the failure to apply it in this case would result
in gross travesty of justice.”
Same; Same; Prescription; Where the failure to file the formal

claim within the prescriptive period contemplated in the air
waybill was largely due to the carrier’s own doing, the
consequences of which
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VOL. 255, MARCH 14, 1996 51
cannot, in all fairness, be attributed to the passenger.—

Considering the abovementioned incidents and private
respondent Mejia’s own zealous efforts in following up the claim,
it was clearly not her fault that the letter of demand for damages
could only be filed, after months of exasperating follow-up of the
claim, on August 13, 1990. If there was any failure at all to file
the formal claim within the prescriptive period contemplated in
the air waybill, this was largely because of PAL’s own doing, the
consequences of which cannot, in all fairness, be attributed to
private respondent.
Same; Same; Same; Equity; Even if the claim for damages
was conditioned on the timely filing of a formal claim, that
condition was deemed fulfilled considering that the collective
action of the carrier’s personnel in tossing around the claim and
leaving it unresolved for an indefinite period of time was
tantamount to “voluntarily preventing its fulfillment,” and the
filing of the baggage freight claim constituted substantial
compliance with the requirement for the filing of a formal claim.—
Even if the claim for damages was conditioned on the timely filing
of a formal claim, under Article 1186 of the Civil Code that
condition was deemed fulfilled, considering that the collective
action of PAL’s personnel in tossing around the claim and leaving
it unresolved for an indefinite period of time was tantamount to
“voluntarily preventing its fulfillment.” On grounds of equity, the
filing of the baggage freight claim, which sufficiently informed
PAL of the damage sustained by private respondent’s cargo,
constituted substantial compliance with the requirement in the
contract for the filing of a formal claim.
Same; Same; Warsaw Convention; Public International Law;
The Warsaw Convention is as much a part of Philippine law as the
Civil Code, Code of Commerce and other municipal special laws,
and the provisions therein contained, specifically on the limitation
of carrier’s liability, are operative in the Philippines but only in
appropriate situations.—All told, therefore, respondent appellate
court did not err in ruling that the provision on limited liability is
not applicable in this case. We, however, note in passing that

while the facts and circumstances of this case do not call for the
direct application of the provisions of the Warsaw Convention, it
should be stressed that, indeed, recognition of the Warsaw
Convention does not preclude the operation of the Civil Code and
other pertinent laws in the determination of the extent of liability
of the common carrier. The Warsaw Convention, being a treaty to
which the Philippines is a signatory, is
52
as much a part of Philippine law as the Civil Code, Code of

Commerce and other municipal special laws. The provisions
therein contained, specifically on the limitation of carrier’s
liability, are operative in the Philippines but only in appropriate
situations.
Same; Same; Presumptions; A common carrier labors under
the statutory presumption of negligence in case of loss, destruction
or deterioration of goods.—Moreover, the trial court underscored
the fact that petitioner was not able to overcome the statutory
presumption of negligence in Article 1735 which, as a common
carrier, it was laboring under in case of loss, destruction or
deterioration of goods, through proper showing of the exercise of
extraordinary diligence. Neither did it prove that the damage to
the microwave oven was because of any of the excepting causes
under Article 1734, all of the same Code. Inasmuch as the subject
item was received in apparent good condition, no contrary
notation or exception having been made on the air waybill upon
its acceptance for shipment, the fact that it was delivered with a
broken glass door raises the presumption that PAL’s personnel
were negligent in the carriage and handling of the cargo.
Same; Same; Damages; The unprofessional indifference of a
carrier’s personnel despite full and actual knowledge of the
damage to a passenger’s cargo, just to be exculpated from liability
on pure technicality and bureaucratic subterfuge, smacks of willful
misconduct and insensitivity to passenger’s plight tantamount to
bad faith and renders unquestionable such carrier’s liability for
damages.—Furthermore, there was glaringly no attempt
whatsoever on the part of petitioner to explain the cause of the
damage to the oven. The unexplained cause of damage to private
respondent’s cargo constitutes gross carelessness or negligence
which by itself justifies the present award of damages. The
equally unexplained and inordinate delay in acting on the claim

upon referral thereof to the claims officer, Atty. Paco, and the
noncommittal responses to private respondent’s entreaties for
settlement of her claim for damages belies petitioner’s pretension
that there was no bad faith on its part. This unprofessional
indifference of PAL’s personnel despite full and actual knowledge
of the damage to private respondent’s cargo, just to be exculpated
from liability on pure technicality and bureaucratic subterfuge,
smacks of willful misconduct and insensitivity to a passenger’s
plight tantamount to bad faith and renders unquestionable
petitioner’s liability for damages. In sum, there is no reason to
disturb
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VOL. 255, MARCH 14, 1996 53
the findings of the trial court in this case, especially with its full
affirmance by respondent Court of Appeals.
Same; Same; Same; Courts; Pesos and Principles; It will never
be known exactly how many man-hours went into the preparation,
litigation and adjudication of a simple dispute over an oven,
which the parties will no doubt insist they contested as a matter of
principle, though one thing is certain—as long as the first letter in
“principle” is somehow outplaced by the peso sign, the courts will
always have to resolve similar controversies although mutual
goodwill could have dispensed with judicial recourse.—On this
note, the case at bar goes into the annals of our jurisprudence
after six years and recedes into the memories of our legal
experience as just another inexplicable inevitability. We will
never know exactly how many man-hours went into the
preparation, litigation and adjudication of this simple dispute
over an oven, which the parties will no doubt insist they contested
as a matter of principle. One thing, however, is certain. As long as
the first letter in “principle” is somehow outplaced by the peso
sign, the courts will always have to resolve similar controversies
although mutual goodwill could have dispensed with judicial
recourse.
PETITION for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.

Siguion Reyna, Montecillo & Ongsiako for petitioner.
Emmanuel G. Vinco for private respondent.
REGALADO, J.:
This is definitely not a case of first impression. The

incident which eventuated in the present controversy is a
drama of common contentious occurrence between
passengers and carriers whenever loss is sustained by the
former. Withal, the exposition of the factual ambience and
the legal precepts in this adjudication may hopefully
channel the assertiveness of passengers and the
intransigence of carriers into the realization that at times a
bad extrajudicial compromise could be better than a good
judicial victory.
54

Assailed in this petition for review is the decision of1

respondent Court of Appeals in CA-G.R. CV No. 2
42744
which affirmed the decision of the lower court finding
petitioner Philippine Air Lines, Inc. (PAL) liable as follows:
“ACCORDINGLY, judgment is hereby rendered ordering

defendant Philippine Air Lines, Inc., to pay plaintiff Gilda C.
Mejia:
(1) P30,000.00 by way of actual damages of the microwave

oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
(4) P10,000.00 as attorney’s fee;
all in addition to the costs of the suit.
Defendant’s
3
counterclaim is hereby dismissed for lack of
merit.”
The facts as found by respondent Court of Appeals are as

follows:
“On January 27, 1990, plaintiff Gilda C. Mejia shipped thru

defendant, Philippine Airlines, one (1) unit microwave oven, with
a gross weight of 33 kilograms from San Francisco, U.S.A. to
Manila, Philippines. Upon arrival, however, of said article in
Manila, Philip-pines, plaintiff discovered that its front glass door
was broken and the damage rendered it unserviceable. Demands
both oral and written were made by plaintiff against the
defendant for the reimbursement of the value of the damaged
microwave oven, and transportation charges paid by plaintiff to

defendant company. But these demands fell on deaf ears.
“On September 25, 1990, plaintiff Gilda C. Mejia filed the
instant action for damages against defendant in the lower court.
“In its answer, defendant Airlines alleged inter alia, by way of
special and affirmative defenses, that the court has no jurisdiction
_______________
1 Per Justice Lourdes K. Tayao-Jaguros, ponente, with Justices Jesus M.

Elbinias and B.A. Adefuin-De la Cruz, concurring; Rollo, 38-45.
2 Original Record, 132-137; penned by Judge Ramon B. Posadas, Regional Trial
Court, Branch 51, Bacolod City.
3 Ibid., 137.
55
VOL. 255, MARCH 14, 1996 55

over the case; that plaintiff has no valid cause of action against
defendant since it acted only in good faith and in compliance with
the requirements of the law, regulations, conventions and
contractual commitments; and that defendant had always
exercised the required diligence
4
in the selection, hiring and
supervision of its employees.”
What had theretofore transpired at the trial in the court a

quo is narrated as follows:
“Plaintiff Gilda Mejia testified that sometime on January 27,

1990, she took defendant’s plane from San Francisco, U.S.A. for
Manila, Philippines (Exh. ‘F’). Amongst her baggages (sic) was a
slightly used microwave oven with the brand name ‘Sharp’ under
PAL Air Waybill No. 0-79-1013008-3 (Exh. ‘A’). When shipped,
defendant’s office at San Francisco inspected it. It was in good
condition with its front glass intact. She did not declare its value
upon the advice of defendant’s personnel at San Francisco.
“When she arrived in Manila, she gave her sister Concepcion C.
Diño authority to claim her baggag(e) (Exh. ‘G’) and took a
connecting flight for Bacolod City.
“When Concepcion C. Diño claimed the baggag(e) (Exh. ‘B’)
with defendant, then with the Bureau of Customs, the front glass
of the microwave oven was already broken and cannot be repaired
because of the danger of radiation. They demanded from
defendant thru Atty. Paco P30,000.00 for the damages although a
brand new one costs P40,000.00, but defendant refused to pay.
“Hence, plaintiff engaged the services of counsel. Despite
demand (Exh. ‘E’) by counsel, defendant still refused to pay.
“The damaged oven is still with defendant. Plaintiff is engaged

in (the) catering and restaurant business. Hence, the necessity of
the oven. Plaintiff suffered sleepless nights when defendant
refused to pay her (for) the broken oven and claims P10,000.00
moral damages, P20,000.00 exemplary damages, P10,000.00
attorney’s fees plus P300.00 per court appearance and P15,000.00
monthly loss of income in her business beginning February, 1990.
“Defendant Philippine Airlines thru its employees Rodolfo
Pandes and Vicente Villaruz posited that plaintiff’s claim was not
investigated until after the filing of the formal claim on August
13,
________________
4 Ibid., 39.
56

1990 (Exh. ‘6’ also Exh. ‘E’). During the investigations, plaintiff
failed to submit positive proof of the value of the cargo. Hence her
claim was denied.
“Also plaintiff’s claim was filed out of time under paragraph 12,
a(1) of the Air Waybill (Exh. ‘A,’ also Exh. ‘1’) which provides: ‘(a)
the person entitled to delivery must make a complaint to the
carrier in writing in case: (1) of visible damage to the goods,
immediately after discovery of the damage5 and at the latest
within 14 days from the receipt of the goods.”
As stated at the outset, respondent Court of Appeals

similarly ruled in favor of private respondent by affirming
in full the trial court’s judgment
6
in Civil Case No. 6210,
with costs against petitioner. Consequently, petitioner now
impugns respondent appellate court’s ruling insofar as it
agrees with (1) the conclusions of the trial court that since
the air waybill is a contract of adhesion, its provisions
should be strictly construed against herein petitioner; (2)
the finding of the trial court that herein petitioner’s
liability is not limited by the provisions of the air waybill;
and (3) the award by the trial court to private respondent
of moral and exemplary damages, attorney’s fees and
litigation expenses.
The trial court relied on the ruling in the case 7 of
Fieldmen’s Insurance Co., Inc. vs. Vda. De Songco, et al. in
finding that the provisions of the air waybill should be
strictly construed against petitioner. More particularly, the
court below stated its findings thus:
“In this case, it is seriously doubted whether plaintiff had read

the printed conditions at the back of the Air Waybill (Exh. ‘1’), or
even if she had, if she was given a chance to negotiate on the
conditions for loading her microwave oven. Instead she was
advised by defendant’s employee at San Francisco, U.S.A., that
there is no need to declare the value of her oven since it is not
brand new. Further, plaintiff testified that she immediately
submitted a formal claim for P30,000.00 with defendant. But their
claim was referred from one
_______________
5 Ibid., 47-48.
6 Ibid., 45.
7 L-24834, September 23, 1968, 25 SCRA 70.
57
VOL. 255, MARCH 14, 1996 57

employee to another th(e)n told to come back the next day, and
the next day, until she was referred to a certain Atty. Paco. When
they got tired and frustrated of coming without a settlement of
their claim in sight, they consulted a lawyer who demanded from
defendant on August 13, 1990 (Exh. ‘E,’ an[d] Exh. ‘6’).
“The conclusion that inescapably emerges from 8
the above
findings of fact is to concede it with credence. x x x.”
Respondent appellate court approved said findings of the

trial court in this manner:
“We cannot agree with defendant-appellant’s above contention.

Under our jurisprudence, the Air Waybill is a contract of adhesion
considering that all the provisions thereof are prepared and
drafted only by the carrier (Sweet Lines v. Teves, 83 SCRA 361).
The only participation left of the other party is to affix his
signature thereto (BPI Credit Corporation vs. Court of Appeals,
204 SCRA 601; Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs.
Court of Appeals, 222 SCRA 108, among the recent cases). In the
earlier case of Angeles v. Calasanz, 135 SCRA 323, the Supreme
Court ruled that ‘the terms of a contract [of adhesion] must9
be
interpreted against the party who drafted the same.’ x x x.”
Petitioner airlines argues that the legal principle

enunciated in Fieldmen’s Insurance does not apply to the
present case because the provisions of the contract involved
here are neither ambiguous nor obscure. The front portion
of the air waybill contains a simple warning that the
shipment is subject to the conditions of the contract on the

dorsal portion thereof regarding the limited liability of the
carrier unless a higher valuation is declared, as well as the
reglementary period within which to submit a written
claim to the carrier in case of damage or loss to the cargo.
Granting that the air waybill is a contract of adhesion, it
has been ruled by the Court that such contracts are not
entirely prohibited and are in fact binding regardless of
whether or not respondent herein read the provisions
thereof. Having contracted the services of
_______________
8 Original Record, 135.

9 Rollo, 42.
58

petitioner carrier instead of other airlines, private

respondent in effect negotiated 10the terms of the contract
and thus became bound thereby.
Counsel for private respondent refutes these arguments
by saying that due to her eagerness to ship the microwave
oven to Manila, private respondent assented to the terms
and conditions of the contract without any opportunity to
question or change its terms which are practically on a
“take-it-or-leave-it” basis, her only participation therein
being the affixation of her signature. Further, reliance on
the Fieldmen’s Insurance case is misplaced since it is not
the ambiguity or obscurity of the stipulation that renders
necessary the strict interpretation of a contract of adhesion
against the drafter, but the peculiarity of the transaction
wherein one party, normally a corporation, drafts all the
provisions of the contract without any participation
whatsoever on the part 11
of the other party other than
affixment of signature.
A review of jurisprudence on the matter reveals the
consistent holding of the Court that contracts of adhesion
are not invalid per se and that it has 12on numerous
occasions upheld the binding effect thereof. As explained
in Ong Yiu vs. Court of Appeals, et al., supra:
_______________
10 Ibid., 23-25; 78-79.
11 Ibid., 62-64.
12 Ong Yiu vs. Court of Appeals, et al., L-40597, June 29, 1979, 91
SCRA 223; Servando, et al. vs. Philippine Steam Navigation, L-36481-2,
October 23, 1982, 117 SCRA 832; Sea Land Services, Inc. vs. Intermediate
Appellate Court, et al., G.R. No. 75118, August 31, 1987, 153 SCRA 552;
Pan American World Airways, Inc. vs. Intermediate Appellate Court, et
al., G.R. No. 70462, August 11, 1988, 164 SCRA 268; Citadel Lines, Inc.
vs. Court of Appeals, et al., G.R. No. 88092, April 25, 1990, 184 SCRA 544;
Magellan Manufacturing Marketing Corporation vs. Court of Appeals, et
al., G.R. No. 95529, August 22, 1991, 201 SCRA 102; Saludo, Jr. vs. Court
of Appeals, et al., G.R. No. 95536, March 23, 1992, 207 SCRA 498; Pan
American World Airways, Inc. vs. Rapadas, et al., G.R. No. 60673, May 19,
1992, 209 SCRA 67.
59
VOL. 255, MARCH 14, 1996 59

“x x x. Such provisions have been held to be a part of the contract

of carriage, and valid and binding upon the passenger regardless
of the latter’s lack of knowledge or assent to the regulation. It is
what is known as a contract of ‘adhesion,’ in regards which it has
been said that contracts of adhesion wherein one party imposes a
ready-made form of contract on the other, as the plane ticket in
the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. x x x, a contract limiting liability
upon an agreed valuation does not offend against the policy of the
law forbidding one from contracting against his own negligence.”
As rationalized in Saludo, Jr. vs. Court of Appeals, et al.,

supra:
“x x x, it should be borne in mind that a contract of adhesion may

be struck down as void and unenforceable, for being subversive of
public policy, only when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the
alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing. x x x.”
but subject to the caveat that—
“x x x. Just because we have said that Condition No. 5 of the

airway bill is binding upon the parties to and fully operative in
this transaction, it does not mean, and let this serve as fair
warning to respondent carriers, that they can at all times
whimsically seek refuge from liability in the exculpatory
sanctuary of said Condition No. 5 x x x.”
The peculiar nature of such contracts behooves the Court to

closely scrutinize the factual milieu to which the provisions
are intended to apply. Thus, just as consistently and
unhesitatingly, but without categorically invalidating such
contracts, the Court has construed obscurities and
ambiguities in the restrictive provisions of contracts of
adhesion strictly albeit not unreasonably against the
drafter thereof when justified in13light of the operative facts
and surrounding circumstances.
________________
13 See Shewaram vs. Philippine Airlines, Inc., L-20099, July 7,
60

We find nothing objectionable about the lower court’s

reliance upon the Fieldmen’s Insurance case, the principles
wherein squarely apply to the present petition. The
parallelism between the aforementioned case and this one
is readily apparent for, just as in the instant case, it is the
binding effect of the provisions in a contract of adhesion (an
insurance policy in Fieldmen’s Insurance) that is put to
test.
A judicious reading of the case reveals that what was
pivotal in the judgment of liability against petitioner
insurance company therein, and necessarily interpreting
the provisions of the insurance policy as ineffective, was
the finding that the representations made by the agent of
the insurance company rendered it impossible to comply
with the conditions of the contract in question, rather than
the mere ambiguity of its terms. The extended
pronouncements regarding strict construction of ambiguous
provisions in an adhesion contract against its drafter,
which although made by the Court as an aside but has
perforce evolved into a judicial tenet over time, was
actually an incidental statement intended to emphasize the
duty of the court to protect the weaker, as against the more
dominant, party to a contract, as well as to prevent the
iniquitous situation wherein the will of one party is
imposed upon the other in the course of negotiation.
Thus, there can be no further question as to the validity
of the terms of the air waybill, even if the same constitutes
a contract of adhesion. Whether or not the provisions
thereof particularly on the limited liability of the carrier
are binding on private respondent in this instance must be

determined from the facts and circumstances involved vis-
a-vis the nature of the provisions sought to be enforced,
taking care that equity
_______________
1966, 17 SCRA 606; Qua Chee Gan vs. Law Union and Rock Insurance
Co., Ltd., etc., 98 Phil. 85 (1955); Fieldmen’s Insurance Co., Inc. vs. Court
of Appeals, et al., supra; Sweet Lines, Inc. vs. Teves, etc., et al., L-37750,
May 19, 1978, 83 SCRA 361; Angeles vs. Calasanz, L-42283, March 18,
1985, 135 SCRA 323; BPI Credit Corporation vs. Court of Appeals, et al.,
G.R. No. 96755, December 1, 1991, 204 SCRA 601; Maersk Line vs. Court
of Appeals, et al., G.R. No. 94761, May 17, 1993, 222 SCRA 108.
61
VOL. 255, MARCH 14, 1996 61

and fair play should characterize the transaction under

review.
On petitioner’s insistence that its liability for the
damage to private respondent’s microwave oven, if any,
should be limited by the provisions of the air waybill, the
lower court had this to say:
“By and large, defendant’s evidence is anchored principally on

plaintiff’s alleged failure to comply with paragraph 12, a(1) (Exh.
‘1-C-2’) of the Air waybill (Exh. ‘A,’ also Exh. ‘1’), by filing a formal
claim immediately after discovery of the damage. Plaintiff filed
her formal claim only on August 13, 1990 (Exh. ‘6,’ also Exh. ‘E’).
And, failed to present positive proof on the value of the damaged
microwave oven. Hence, the denial of her claim.
“This Court has misgivings about these pretensions of
defendant.
xxx
“Finally, the Court finds no merit to defendant’s contention
that under the Warsaw Convention, its liability if any, cannot
exceed U.S. $20.00 based on weight as plaintiff did not declare the
contents14
of her baggage nor pay additional charges before the
flight.”
The appellate court declared correct the non-application by

the trial court of the limited liability of therein defendant-
appellant under the “Conditions of the Contract” contained
in the air waybill, based on the ruling in Cathay 15
Pacific
Airways, Ltd. vs. Court of Appeals, et al., which
substantially enunciates the rule that while the Warsaw

Convention has the force and effect of law in the
Philippines, being a treaty commitment by the government
and as a signatory thereto, the same does not operate as an
exclusive enumeration of the instances when a carrier shall
be liable for breach of contract or as an absolute limit of the
extent of liability, nor does it preclude the operation of the
Civil Code or other pertinent laws.
_______________
14 Original Record, 134, 136.

15 G.R. No. 60501, March 5, 1993, 219 SCRA 521.
62

Petitioner insists that both respondent court and the trial

court erred in finding that petitioner’s liability, if any, is
not limited by the provisions of the air waybill, for, as
evidence of the contract of carriage between petitioner and
private respondent, it substantially states that the shipper
certifies to the correctness of the entries contained therein
and accepts that the carrier’s liability is limited to US$20
per kilogram of goods lost, damaged or destroyed unless a
value is declared and a supplementary charge paid.
Inasmuch as no such declaration was made by private
respondent, as she admitted during cross-examination, the
liability of petitioner, if any, should be limited to 28
kilograms multiplied by US$20, or $560. Moreover, the
validity of these conditions has been upheld in the leading
case of Ong Yiu vs. Court of Appeals, et al., supra, and
subsequent cases, for being a mere reiteration of the
limitation of liability under the Warsaw
16
Convention, which
treaty has the force and effect of law.
It is additionally averred that since private respondent
was merely advised, not ordered, that she need not declare
a higher value for her cargo, the final decision of refraining
from making such a declaration fell on private respondent
and should not put 17the petitioner in estoppel from invoking
its limited liability.
In refutation, private respondent explains that the
reason for the absence of a declaration of a higher value
was precisely because petitioner’s personnel in San
Francisco, U.S.A., advised her not to declare the value of
her cargo, which testimony has not at all been rebutted by
petitioner. This being so, petitioner is estopped from

faulting private respondent 18for her failure to declare the
value of the microwave oven.
The validity of provisions limiting the liability of
carriers contained in bills of lading have been consistently
upheld for the following reason:
_______________
16 Rollo, 26-31.
17 Ibid., 80-81.
18 Ibid., 64-65.
63
VOL. 255, MARCH 14, 1996 63

“x x x. The stipulation in the bill of lading limiting the common

carrier’s liability to the value of goods appearing in the bill, unless
the shipper or owner declares a greater value, is valid and
binding. The limitation of the carrier’s liability is sanctioned by
the freedom of the contracting parties to establish such
stipulations, clauses, terms, or conditions as they may deem
convenient, provided they are not 19
contrary to law, morals, good
customs and public policy. x x x.”
However, the Court has likewise cautioned against blind

reliance on adhesion contracts where the facts and 20
circumstances warrant that they should be disregarded.
In the case at bar, it will be noted that private
respondent signified an intention to declare the value of the
microwave oven prior to shipment, but was explicitly
advised against doing so by PAL’s personnel in San
Francisco, U.S.A., as borne out by her testimony in court:
xxx
“Q Did you declare the value of the shipment?
A No. I was advised not to.
Q Who advised you?
21
A At the PAL Air Cargo.”
It cannot be denied that the attention of PAL through its

personnel in San Francisco was sufficiently called to the
fact that private respondent’s cargo was highly susceptible
to breakage as would necessitate the declaration of its
actual value. Petitioner had all the opportunity to check
the condition
22
and manner of packing prior to acceptance for
shipment, as well as during the preparation of the air
waybill by PAL’s
_______________
19 St. Paul Fire & Marine Insurance Co. vs. Macondray & Co., L-27796,
March 25, 1976, 70 SCRA 122, 126. See also Sea Land Services, Inc. vs.
Intermediate Appellate Court, et al., supra; Pan American World Airways,
Inc. vs. Intermediate Appellate Court, et al., supra; Citadel Lines, Inc. vs.
Court of Appeals, et al., supra.
20 Sweet Lines, Inc. vs. Teves, supra; Pan American World Airways,
Inc. vs. Rapadas, et al., supra.
21 TSN, February 13, 1992, 40.
22 Ibid., id., 17.
64

Acceptance
23
Personnel based on information supplied by the
shipper, and to reject the cargo if the contents or the
packing did not meet the company’s required specifications.
Certainly, PAL could not have been otherwise prevailed
upon to merely accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL
Import Section at the time of incident, posited that there
may have
24
been inadequate and improper packing of the
cargo, which by itself could be a ground for refusing
carriage of the goods presented for shipment, he
nonetheless admitted on cross-examination that private
respondent’s cargo was accepted by PAL in its San
Francisco office:
“ATTY. VINCO
So that, be that as it may, my particular concern is
that, it is the PAL personnel that accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
Also, if he comes from abroad like in this particular
case, it is the PAL personnel who accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
And the PAL personnel may or may not accept the
baggage?
WITNESS
Yes, sir.
ATTY. VINCO
According to what is stated as in the acceptance of the
cargo, it is to the best interest of the airlines, that is, he
want(s) also that the airlines would be free from any lia
bility. Could that be one of the grounds for not admitting
a baggage?
WITNESS
Safety is number one (1)
x x x
_______________
23 Ibid., August 14, 1992, 34-36.

24 Ibid., August 13, 1992, 11-14.
65
VOL. 255, MARCH 14, 1996 65

ATTY. VINCO
So, this baggage was accepted and admitted in San
Francisco?
WITNESS
Yes, sir.
ATTY. VINCO
And you could not show any document to the Court that
would suggest that this baggage was denied admittance
by your office at San Francisco?
WITNESS
No, I cannot show.
ATTY. VINCO
Now, can you show any document that would suggest
that there was insufficient pac(k)aging on this particular
baggage from abroad?
WITNESS
25
25
No, sir.”
In response to the trial court’s questions during the trial,

he also stated that while the passenger’s declaration
regarding the general or fragile character of the cargo is to
a certain extent determinative of its classification, PAL
nevertheless has and exercises discretion as to the manner
of handling required by the nature of the cargo it accepts
for carriage. He further opined that the microwave oven
was only a general, not a 26fragile, cargo which did not
require any special handling.
There is no absolute obligation on the part of a carrier to
accept a cargo. Where a common carrier accepts a cargo for
shipment for valuable consideration, it takes the risk of
delivering it in good condition as when it was loaded. And if
the fact of improper packing is known to the carrier or its
personnel, or apparent upon observation but it accepts the
goods notwithstanding such condition, it is not 27
relieved of
liability for loss or injury resulting therefrom.
_______________
25 Ibid., August 14, 1992, 30-33.

26 Ibid., id., 37-41.
27 Agbayani, A.F., Commentaries and Jurisprudence on the
Commercial Laws of the Philippines, Vol. IV, 1993 ed., 31-32.
66

The acceptance in due course by PAL of private

respondent’s cargo as packed and its advice against the
need for declaration of its actual value operated as an
assurance to private respondent that in fact there was no
need for such a declaration. Petitioner can hardly be
faulted for relying on the representations of PAL’s own
personnel.
In other words, private respondent Mejia could and
would have complied with the conditions stated in the air
waybill, i.e., declaration of a higher value and payment of
supplemental transportation charges, entitling her to
recovery of damages beyond the stipulated limit of US$20
per kilogram of cargo in the event of loss or damage, had
she not been effectively prevented from doing so upon the
advice of PAL’s personnel for reasons best known to
themselves.
As pointed out by private respondent, the aforestated

facts were not denied by PAL in any of its pleadings nor
rebutted by way of evidence presented in the course of the
trial, and thus in effect it judicially admitted that such an
advice was given by its personnel in San Francisco, U.S.A.
Petitioner, therefore, is estopped from blaming private
respondent for not declaring the value of the cargo shipped
and which would have otherwise entitled her to recover a
higher amount of damages. The Court’s bidding in the
Fieldmen’s Insurance case once again rings true:
“x x x. As estoppel is primarily based on the doctrine of good faith

and the avoidance of harm that will befall an innocent party due
to its injurious reliance, the failure to apply it in this case would
result in gross travesty of justice.”
We likewise uphold the lower court’s finding that private

respondent complied with the requirement for the
immediate filing of a formal claim for damages as required
in the air waybill or, at least, we find that there was
substantial compliance therewith.
Private respondent testified that she authorized her
sister, Concepcion Diño, to claim her cargo consisting of a
microwave oven since the former had to take a connecting
flight to Ba-
67
VOL. 255, MARCH 14, 1996 67

colod City
28
on the very same afternoon of the day of her
arrival. As instructed, Concepcion Diño promptly
proceeded to PAL’s Import Section the next day to claim
the oven. Upon discovering that the glass door was broken,
she immediately
29
filed a claim by way of the baggage freight
claim on which30
was duly annotated the damage sustained
by the oven. Her testimony relates what took place
thereafter:
“ATTY. VINCO
So, after that inspection, what did you do?
WITNESS
After that annotation placed by Mr. Villaruz, I went
home and I followed it up the next day with the Clerk of
PAL cargo office.
ATTY. VINCO
What did the clerk tell you?

WITNESS
She told me that the claim was being processed and I
made several phone calls after that. I started my follow-
ups February up to June 1990.
ATTY. VINCO
And what results did those follow-ups produce?
WITNESS
All they said (was) that the document was being
processed, that they were waiting for Atty. Paco to report
to the office and they could refer the matter to Atty.
Paco.
ATTY. VINCO
Who is this Atty. Paco?
WITNESS
He was the one in-charge of approving our claim.
ATTY. VINCO
Were you able to see Atty. Paco?
WITNESS
Yes, sir. I personally visited Atty. Paco together with
my auntie who was a former PAL employee.
x x x
_______________
28 Ibid., February 13, 1992, 18-20.

29 Exhibit B; Original Record, 73.
30 Ibid., March 17, 1992, 10-19; August 14, 1992, 23-27.
68

ATTY. VINCO
So, what did you do, did you make a report or did you
tell Atty. Paco of your scouting around for a possible
replacement?
WITNESS
I did call him back at his office. I made a telephone
call.
ATTY. VINCO
And what answer did Atty. Paco make after you have
reported back to him?
WITNESS
They told me that they were going to process the
claim based on the price that I gave them but there was
no definite result.
ATTY. VINCO
How many times did you go and see Atty. Paco
regarding the claim of your sister?
WITNESS
I made one personal visit and several follow-up calls.
With Atty. Paco, I made one phone call but I made
several phone calls with his secretary or the clerk at PAL
cargo office and I was trying to locate him but 31
unfortunately, he was always out of his office.”
**
PAL claims processor, Rodolfo Pandes, confirmed having 32
received the baggage freight claim on January 30, 1990
and the referral to and extended pendency of the private
respondent’s claim with the office of Atty. Paco, to wit:
“ATTY. VINCO:
Q And you did instruct the claimant to see the Claim
Officer of the company, right?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And the Claim Officer happened to be Atty. Paco?
WITNESS:
A Yes, sir.
_______________
31 Ibid., March 17, 1992, 21-23, 26-28.

** His surname is spelled “Pandas” in some parts of the records.
32 Ibid., July 2, 1992, 26-27.
69
VOL. 255, MARCH 14, 1996 69

ATTY. VINCO:
Q And you know that the plaintiff thru her authorized
representative Concepcion Diño, who is her sister had
many times gone to Atty. Paco, in connection with this
claim of her sister?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q As a matter of fact even when the complaint was
already filed here in Court the claimant had continued
to call about the settlement of her claim with Atty.
Paco, is that correct?
xxx
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q You know this fact because a personnel saw you in one
of the pre-trial here when this case was heard before the
sala of Judge Moscardon, is that correct?
WITNESS:
A Yes.
ATTY. VINCO:
Q In other words, the plaintiff rather had never stop(ped)
in her desire for your company to settle this claim,
right?
WITNESS:
33
A Yes, sir.”
Considering the abovementioned incidents and private

respondent
34
Mejia’s own zealous efforts in following up the
claim, it was clearly not her fault that the letter of
demand for damages could only be filed, after months35 of
exasperating follow-up of the claim, on August 13, 1990. If
there was any failure at all to file the formal claim within
the prescriptive period contemplated in the air waybill, this
was largely because of PAL’s own doing, the consequences
of which cannot, in all fairness, be attributed to private
respondent.
_______________
33 Ibid., July 2, 1992, 30-32.

34 TSN, February 13, 1992, 20-22, 25.
35 Exhibit “E”; Original Record, 76.
70

Even if the claim for damages was conditioned on the

timely filing of a formal claim, under Article 1186 of the
Civil Code that condition was deemed fulfilled, considering
that the collective action of PAL’s personnel in tossing
around the claim and leaving it unresolved for an indefinite
period of time was tantamount to “voluntarily preventing
its fulfillment.” On grounds of equity, the filing of the
baggage freight claim, which sufficiently informed PAL of
the damage sustained by private respondent’s cargo,
constituted substantial compliance with the requirement in
the contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err
in ruling that the provision on limited liability is not
applicable in this case. We, however, note in passing that
while the facts and circumstances of this case do not call
for the direct application of the provisions of the Warsaw
Convention, it should be stressed that, indeed, recognition
of the Warsaw Convention does not preclude the operation
of the Civil Code and other pertinent laws in the
determination
36
of the extent of liability of the common
carrier.
The Warsaw Convention, being a treaty to which the
Philippines is a signatory, is as much a part of Philippine
law as the Civil Code, 37
Code of Commerce and other
municipal special laws. The provisions therein contained,
specifically on the limitation of carrier’s liability, are
operative in the Philippines but only in appropriate
situations.
Petitioner ascribes ultimate error in the award of moral
and exemplary damages and attorney’s fees in favor of
private respondent in that other than the statement of the
trial court that petitioner acted in bad faith in denying
private respondent’s claim, which was affirmed by the
Court of Appeals, there is no evidence on record that the
same is true. The denial of private respondent’s claim was
supposedly in the
_______________
36 Cathay Pacific Airways, Inc. vs. Court of Appeals, et al., supra; Luna,
et al. vs. Court of Appeals, et al., G.R. Nos. 100374-75, November 27, 1992,
216 SCRA 107.

37 Santos III vs. Northwest Airlines, et al., G.R. No. 101538, June 23,
1992, 210 SCRA 256.
71
VOL. 255, MARCH 14, 1996 71

honest belief that the same had prescribed, there being no

timely formal claim filed; and despite having been given an
opportunity to submit positive proof of the value of the
damaged microwave oven, no such proof was submitted.
Petitioner insists that its failure to deliver the oven in the
condition in which it was shipped 38
could hardly be
considered as amounting to bad faith.
Private respondent counters that petitioner’s failure to
deliver the microwave oven in the condition in which it was
received can be described as gross negligence amounting to
bad faith, on the further consideration that it failed to
prove that it exercised the extraordinary diligence required
by law, and that no explanation whatsoever39was given as to
why the front glass of the oven was broken.
The trial court justified its award of actual, moral and
exemplary damages, and attorney’s fees in favor of private
respondent in this wise:
“Since the plaintiff’s baggage destination was the Philippines,

Philippine law governs the liability of the defendant for damages
for the microwave oven.
“The provisions of the New Civil Code on common carriers are
Article(s) 1733, 1735 and 1753 x x x.
xxx
“In this case, defendant failed to overcome, not only the
presumption but more importantly, plaintiff’s evidence that
defendant’s negligence was the proximate cause of the damages of
the microwave oven. Further, plaintiff has established that
defendant acted in bad faith when it denied the former’s claim on
the ground that the formal claim was filed beyond the period as
provided in paragraph 12 (a-1) (Exh. ‘1-C-2’) of the Air Waybill
(Exh. ‘1,’ also Exh. ‘A’), when actually, Concepcion Diño, sister of
plaintiff has immediately
40
filed the formal claim upon discovery of
the damage.”
_______________
38 Rollo, 33, 81-82.

39 Ibid., 65-66.
40 Original Record, 136-137.
72

Respondent appellate court was in full agreement with the

trial court’s finding of bad faith on the part of petitioner as
a basis for the award of the aforestated damages, declaring
that:
“As to the last assigned error, a perusal of the facts and law of the
case reveals that the lower court’s award of moral and exemplary
damages, attorney’s fees and costs of suit to plaintiff-appellee is in
accordance with current laws and jurisprudence on the matter.
Indeed, aside from the fact that defendant-appellant acted in bad
faith in breaching the contract and in denying plaintiff’s valid
claim for damages, plaintiff-appellee underwent profound
distress, sleep-less nights, and anxiety upon knowledge of her
damaged microwave oven in possession of defendant-appellant,
entitling her to the award of moral and exemplary damages
(Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221,
New Civil Code), and certainly plaintiff-appellant’s unjust refusal
to comply with her valid demand for payment, thereby also
entitling
41
her to reasonable attorney’s fees [Art. 2208 (2) and (11),
id.].”
It will be noted that petitioner never denied that the

damage to the microwave oven was sustained while the
same was in its custody. The possibility that said damage
was due to causes beyond the control of PAL has effectively
been ruled out since the entire process in handling of the
cargo—from the unloading thereof from the plane, the
towing and transfer to the PAL warehouse, the transfer to
the Customs examination area, and its release thereafter to
the shipper—was done almost exclusively by, and within
the intervention or, at the very least, under
42
the direct
supervision of a responsible PAL personnel.
The very admissions of PAL, through Vicente Villaruz of
its Import Section, as follows:
ATTY. VINCO
So that, you now claim, Mr. Witness, that from the
time the cargo was unloaded from the plane until the
time it reaches the Customs counter where it was
inspected, all
_______________
41 Rollo, 44-45
42 TSN, August 14, 1992, 4-18.
73
VOL. 255, MARCH 14, 1996 73

the way, it was the PAL personnel who did all these
things?
WITNESS
Yes, however, there is also what we call the Customs
storekeeper and the Customs guard along with the cargo.
ATTY. VINCO
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the
Customs?
WITNESS
43
He is a PAL employee.”
lead to the inevitable conclusion that whatever damage

may have been sustained by the cargo is due to causes
attributable to PAL’s personnel or, at all events, under
their responsibility.
Moreover, the trial court underscored the fact that
petitioner was not able to overcome the statutory
presumption of negligence in Article 1735 which, as a
common carrier, it was laboring under in case of loss,
destruction or deterioration of goods, through proper
showing of the exercise of extraordinary diligence. Neither
did it prove that the damage to the microwave oven was
because of any of the excepting causes under Article 1734,
all of the same Code. Inasmuch as the subject item was
received in apparent good condition, no contrary notation
or exception having been made on the air waybill upon its
acceptance for shipment, the fact that it was delivered with
a broken glass door raises the presumption that PAL’s
personnel44were negligent in the carriage and handling of
the cargo.
Furthermore, there was glaringly no attempt

whatsoever on the part of petitioner to explain the cause of
the damage to the oven. The unexplained cause of damage
to private respondent’s cargo constitutes gross carelessness
or negligence
_______________
43 Ibid., id., 22-23.

44 See National Development Corporation vs. Court of Appeals, et al.,
L-49407, August 19, 1988, 164 SCRA 593.
74

45
which by itself justifies the present award of damages.
The equally unexplained and inordinate delay in acting on
the claim upon referral thereof to the claims officer, Atty.
Paco, and the noncommittal responses to private
respondent’s entreaties for settlement of her claim for
damages belies petitioner’s pretension that there was no
bad faith on its part. This unprofessional indifference of
PAL’s personnel despite full and actual knowledge of the
damage to private respon-dent’s cargo, just to be
exculpated from liability on pure technicality and
bureaucratic subterfuge, smacks of willful misconduct and
insensitivity
46
to a passenger’s plight tantamount to bad
faith and renders unquestionable petitioner’s liability for
damages. In sum, there is no reason to disturb the findings
of the trial court in this case, especially with its full
affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our
jurisprudence after six years and recedes into the
memories of our legal experience as just another
inexplicable inevitability. We will never know exactly how
many man-hours went into the preparation, litigation and
adjudication of this simple dispute over an oven, which the
parties will no doubt insist they contested as a matter of
principle. One thing, however, is certain. As long as the
first letter in “principle” is somehow outplaced by the peso
sign, the courts will always have to resolve similar
controversies although mutual goodwill could have
dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed
judgment of respondent Court of Appeals is AFFIRMED in
toto.
SO ORDERED.
Romero, Puno and Mendoza, JJ., concur.
_______________
45 See Maersk Line vs. Court of Appeals, et al., supra.

46 Trans World Airlines vs. Court of Appeals, et al., G.R. No. 78656,
August 30, 1988, 165 SCRA 143; Cathay Pacific Airways, Ltd. vs. Court of
Appeals, et al., G.R. No. 60501, March 5, 1993, 219 SCRA 520.
75
VOL. 255, MARCH 15, 1996 75

Borromeo vs. Intermediate Appellate Court
Judgment affirmed in toto.
Notes.—The contract of air carriage generates a

relation attended with a public duty and any discourteous
conduct on the part of the carrier’s employees toward a
passenger gives the latter an action for damages against
the carrier. (Korean Airlines Co., Ltd. vs. Court of Appeals,
234 SCRA 717 [1994])
Where a common carrier fails to exercise due diligence
in the supervision of its employees, it could be held liable
for damages for the resulting harm to others. (Sulpicio
Lines, Inc. vs. Court of Appeals, 246 SCRA 299 [1995])
——o0o——
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10/3/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 255

48 SUPREME COURT REPORTS ANNOTATED

PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF

Common Carriers; Air Transportation; Compromise

VOL. 255, MARCH 14, 1996 49